The introduction of “infrastructure charges” at a number of Australian ports for transport companies collecting or dropping off containers has created the most heated argument seen in the sector for years.

Both DP World and Patrick recently either introduced or substantially increased such levies, claiming increasing costs and difficult market conditions such as pressures from the consolidation of shipping lines, plus the need for continuing investment.

DP World Australia (DPWA) managing director and chief executive Paul Scurrah says stevedores have made a collective investment of more than A$2bn over the last decade in more efficient cargo-handling quayside and landside, combined with improved work practices and vastly improved truck turnaround times.

However, the gains have been negated by punishing increases in occupancy and energy costs, along with sustained pressure on volumes and pricing resulting from the global downturn in shipping.

“Clearly there is a limit to what can be absorbed if the stevedores are to be able to continue a programme of capital expenditure and innovation for a service that is at the heart of the Australian economy,” he says.

Not popular

It’s not a viewpoint that gets any credence from the company’s trucking customers.

When DPWA announced it was lifting its per container levies for transport operators from January 1, 2018 by 78% at Port Botany, 51% in Melbourne and 18% in Brisbane, Road Freight New South Wales general manager Simon O’Hara, described the move as a “kick in the guts for truckies”.

He added: “From our perspective there is simply no justification for yet another price hike – it’s nothing but a greedy cash grab from DPWA …What’s worse is the other stevedores will undoubtedly follow DPWA.”

The Freight and Trade Alliance and Australian Peak Shippers’ Association (FTA/APSA) said it “cannot accept the quantum, timing or reasons provided for the increase” and bemoan the fact that warnings that this might happen to the Australian Competition and Consumer Commission (ACCC, the country’s competition watchdog), failed to provoke action.

“Unfortunately, FTA/APSA warned the ACCC that inaction would see industry faced with regular and significant increases at the terminal gate, which is exactly what we see today,” said the joint bodies’ secretariat, Travis Brooks-Garrett.

“If the ACCC and government do not act then they will send a signal to the stevedores that they can hold Australia’s international trade sector to ransom with no threat of a Government response.”

What's changed?

Neil Chambers, director of the Australian Container Transport Alliance, asks the question: “What’s changed in DPWA's costs that they didn’t know six months’ ago?

“These massive increases have been announced only six months since DPWA implemented a 900% increase in its infrastructure surcharge in Melbourne and introduced a new surcharge in Port Botany and Fremantle, through which DPWA, together with similar surcharges imposed by rival Patrick, will pocket some A$70m per annum for the two stevedore companies combined.”

Mr Chambers suggests one conclusion is that DPWA believes they weathered the storm of opposition to the initial increases, with barely a murmur from regulators such as the ACCC or from Federal and State Governments. So, they simply thought they’d do so again to make up their revenue shortfall caused by dropping stevedoring rates to shipping lines.

Federal infrastructure minister Darren Chester has been sympathetic to landside operators, saying they deserve benefits from paying more in infrastructure fees. However, he says the ACCC is the appropriate body to examine the impact of such fees.

Profits rise

Further heat has been added by the release of the ACCC’s annual Container Stevedoring Monitoring Report.

The ACCC monitors stevedoring at five Australian container ports. Patrick and DPWA operate at the four largest ports - Brisbane, Fremantle, Melbourne and Sydney. Hutchison operates in Brisbane and Sydney, while ICTSI's VICT started operations in Melbourne in early 2017. Flinders Adelaide is the sole terminal operator at the Port of Adelaide.

The report reveals that stevedoring operating profits per teu have risen by over 25% in 2016-17. Furthermore, the report does not give full support to the stevedores’ claims of rising costs.

ACCC chairman Rod Sims says: “While there is merit to the stevedores’ claims about higher property costs, their overall costs remain stable." He adds: “…the ACCC will be interested to see whether these infrastructure charges are used to improve landside facilities beyond business-as-usual levels."

Mr Sims says while some organisations approached the ACCC with allegations that the infrastructure charges may have contravened provisions of the Competition and Consumer Act 2010, there are no provisions in the Act to deal with excessive pricing.

However, the report does say that competition levels are set to increase as there are now three stevedores competing at the nation’s three largest container ports.

“Competition has significantly increased in recent years with the introduction of a third stevedore in Sydney and Brisbane, and now we can add Melbourne to that list. As such, we expect to see greater levels of price competition as new entrants and incumbents compete for market share,” says Mr Sims.

Shipping lines benefit

One other interesting fact to emerge from the report is that shipping lines benefitted from lower prices as the stevedores reported revenues in 2016-17 falling by 4.5%.

The volume of containers passing through Australia’s ports is the highest ever recorded. In 2016-17 stevedores handled 7.2m teu, an increase of 3.7%.

The report also found that quayside productivity remains close to record levels. However, both capital and labour productivity fell slightly.

“The stevedoring industry is not reporting the same level of productivity improvements that we have seen in previous years. With the new stevedores now in place along the east coast ports, we will be looking for this productivity growth to return in future,” Mr Sims says.

Other observers see the need for further price reductions.

Shipping Australia chief executive Rod Nairn says Australian port and stevedoring charges are still high by international comparisons, such as with New Zealand. "We would like to see some further sharpening of the pencil in order to make transhipments more feasible and cost effective, to make Australian containerised exports more competitive and reduce supply chain costs for consumers.

“If more of our domestic container cargo were moved by sea it would increase the throughput for the stevedores, who all have excess capacity at the moment, making their businesses more profitable and allowing them to trim their charges.”

Another revelation from the ACCC report is that the number one container port is now Sydney with a record 2.5m teu, closely followed by Melbourne with 2.4m teu, then Brisbane with 1.2m teu, Fremantle with 700,000 teu and Adelaide with 400,000 teu.

One factor hampering Melbourne is the restrictions on the size of container vessels that can access Swanson Dock. Without a solution to allow larger vessels to come upriver, Melbourne is being prevented from servicing the larger class of boxship that Sydney can serve.

Regional success

It is not just the major Australian ports who are doing well. Many regional ports are also finding new areas of cargo growth.

A stand out is the Port of Townsville, which reported that in the first quarter of its current financial year, trade in containerised and general cargo increased 135%.

The port now has five container line services to offer, with improving frequencies to Papua New Guinea, South East Asia, China and Japan in particular. Two new mining operations will start mineral concentrate exports out of the port in the near future, adding to the bright outlook.

Renewable energy investment is having an impact in terms of project moves through ports. Cargo for the Sun Metals, Kidston and Clare solar farms have started flowing through Townsville which is preparing a ten-hectare laydown site to cater to the continuing growth in project cargo.

Meanwhile, the Port of Cairns is benefiting from Ports North winning the contract to bring in eight cargo vessels carrying 57-metre-long turbine blades, along with more than 450 turbine parts, for the A$380m Mt Emerald wind farm.

The blades and parts will be stored at a A$1.8m purpose-built cargo import lay-down facility and progressively transported on specialised trailers.

The Port of Newcastle recently completed a six-month programme of shipping wind turbine blades for the White Rock Wind Farm. A total of 700 oversize loads of turbine components will eventually travel from Newcastle to the windfarm site.

TARANAKI TAKES BOX LOSS ON THE CHIN

While New Zealand’s east coast ports prosper with container traffic, its sole west coast port - Port Taranaki – has finally given up trying to attract container services, shutting its container transfer site and withdrawing from the sector completely.

Port Taranaki chief executive Guy Roper said that the introduction of larger international container vessels, the development of inland ports, and the increased use of rail transport linking to ports with international departures, prompted the decision.

The last full container service ended in October 2014 when coastal operator Pacifica made its final call. Since then the port has worked with potential customers and shipping lines and maintained a container transfer site, making boxes available to local importers and exporters.

However, Mr Roper says container services rely on scale and throughput, and Taranaki has been unable to secure sufficient trade to attract shipping lines.

The port will now focus on growth in other areas such as its burgeoning log trade, as well as concentrating on its core businesses of bulk liquids, bulk dry products and support of the offshore oil and gas sector.